Biden’s SEC finances request insufficient as company tackles bold agenda, monetary watchdogs say
President Joe Biden’s budget proposal for the Securities and Exchange Commission is inadequate, proponents of financial regulators say as the country’s leading financial regulator has to monitor a record pace of corporate IPOs, implement an ambitious agenda for new regulations, and further regulate cryptocurrencies and cryptocurrencies this year special acquisition company.
Biden’s overall budget proposal for fiscal year 2022 includes spending around $ 6 trillion, up 35% from pre-crisis, spending $ 4.4 trillion in 2019, but only asking for a 5% increase versus the filing of the Securities and Exchange Commission for fiscal 2021 – below the average budget increase over the past 25 years.
Proponents of financial reform say the nearly $ 2 billion budget request is unnecessarily puny given the general willingness to spend more and the fact that the SEC is self-funding through industry fees and almost always sends more back to the Treasury Department than it does when considering the fines it incurs, through to the process of punishing companies and individuals for violating its rules.
“The agency is under pressure from all angles to do more,” said Tyler Gellasch, executive director of the Healthy Markets Association, in an interview. These include promulgating new climate risk disclosure rules, enforcing rules for a rapidly growing universe of public companies, working with their counterparts overseas, and regulating the expanding cryptocurrency market.
“The agency is being asked to do a lot of things that it traditionally don’t do at the same time,” added Gellasch. “This is not a qualitatively different budget request than we have seen in the past – it is hard to see how you will implement all these new things in this budget.”
SEC chairman Gary Gensler appears to agree with such an analysis, according to a statement submitted to a budget subcommittee last week. “After joining the SEC last month, I was impressed with the size of the capital markets and the agency’s work,” he wrote, noting that the regulator oversees a $ 100 trillion capital market, including 28,000 registered companies, more than 3,700 broker-dealers, 24 national stock exchanges, seven clearing houses and more than 2,300 filings from self-regulatory organizations.
He said the SEC’s workforce had declined 4% over the past five years, while the number of registered investment advisors in their area of responsibility increased by 2,000, while their individual clients increased by 20% to 48 million individuals. “As our capital markets have grown, the SEC has not grown to meet the needs of the 2020s.”
The SEC declined to comment on the president’s budget request.
Dennis Kelleher, president and CEO of the bipartisan financial reform organization Better Markets, said the SEC is in a unique position to ask for a larger budget as it brings in money through a small fee for financial market transactions and through penalties placed on market participants who violate the Violate agency rules.
“You can double the SEC’s budget and it wouldn’t even affect the overall budget and taxpayers wouldn’t have to pay a dime for it,” Kelleher told MarketWatch. “And the sad part is that financial regulation isn’t a super hot topic until it crashes.”
A bigger increase in the SEC budget would likely meet opposition from Republican lawmakers, as Gensler’s reputation as a regulator ready to step on the toes of the financial services industry and its staunch opposition to the SEC’s efforts to introduce new climate change disclosure rules adopt, employee diversity and more.
Senator Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee, said in April that Gensler would not be re-elected for these efforts.
“The SEC’s mission is to facilitate capital formation and maintain fair, orderly and efficient markets. The SEC has neither the responsibility nor the authority to use its regulatory powers to advance a liberal social agenda on issues such as global warming, political spending and diversity, “Toomey said in a statement. “Based on Gary Gensler’s records and statements during his nomination process, I am concerned that he will use the SEC in this inappropriate manner and deviate from the SEC’s tradition of non-partisanship.”
Gensler’s nomination advanced to the full Senate, with only two Republicans from the banking panel voting in favor, compared to near universal Republican support for the previous Democratic administration’s two nominees for the role. A substantial increase in the SEC’s budget would likely allow the agency to set additional rules in the coming years, which are met with strong opposition from the GOP.
Proponents of increased SEC funding struggle to understand a failure to request more money, even if Congress ultimately refuses to approve the request.
“In the context of the proposed overall budget, an increase of less than 3% for both enforcement and SEC inspections is pretty meager,” said Kurt Schacht, executive director of the CFA Institute, in an email.
“Given that we are now a full year behind on the full (personal) audit of registrants and other regulated companies, combined with the huge surge in IPOs and SPACs, social media disruptions and renewed problems with market debt, the agency will have difficulties. “Just to catch up,” said Schacht. “We know what happens when the industry and market practices are one step ahead of the primary regulator and it’s never good.”